ITAT remanded matter on question of rejection of books of account u/s 145 (3) if proper explanation or details were filed before AO

Brief of the case:

AO find decline in gross profit rate in current year in comparison to previous year. On examination of books of account AO found discrepancies in accounts. He made additions after rejecting books of account u/s 145 (3). Assessee filed appeal before CIT (A) who allowed appeal of the assessee by holding that mere difference in rate of gross profit would amount to rejection of books of account and deleted the additions. Aggrived from the order revenue filed appeal before ITAT. After going through the facts of the case ITAT remanded the matter back to AO for further verification.

Facts of the case:

• Assessee deals in purchase and sale of Till. Assessee filed his return at Rs. 57,33,650/-. The AO observed that the assessee had not enclosed the audit report prescribed u/s 44AB of the Act. The assessee has submitted in the return that the case is not auditable.
• The AO gave the reasonable opportunity of being heard to assessee whether the assessee’s case was liable to audited or not.
• The assessee submitted before the AO that the case was audited by CA but while filing the return computer clerk had not mentioned the name of the auditor and due to heavy rush for submitting the return at last date.
• The AO enquired from CA whether he had audited the accounts or not but he has not responded to the AO and neither he confirmed nor he denied having been audited the case of the assessee.
• He observed that the audit report is incomplete and many enclosures and schedules are not enclosed with the audit report i.e. quantitative details of goods, audited and certified which is the part of form no. 3CD.
• He further observed that assessee didnot maintain the quantitative details of opening and closing stock with valuation of stock and method of valuation and the assessee failed to submit the required information regarding method of valuation of stock.
• In view of the above discrepancies pointed out, the AO invoked the provisions of Section 145(3) of the Act and rejected the books and thus applied gross profit rate on total turnover @ 9.55% as shown in the last previous year. Thus the AO made trading addition of Rs. 97,99,900/- on turnover of Rs. 25,61,65,240/-.

Contention of the revenue: